Just Eat Takeaway.com N.V.

Hello and welcome to the Just Eat Takeaway.com Q3 2024 Trading Update. My name is Caroline and I'll be your coordinator for today's event. Please note this call is being recorded and for the duration of the call your lines will be on listen only mode. However, you will have an opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your questions. If you require assistance at any point, please press star 0 and you'll be connected to an operator. I will now hand over the call to your host, Jitse Goen, the CEO, to begin today's conference. Thank you.

Thank you, operator. Good morning and welcome to this analyst and investor conference call to discuss the first quarter 2024 trading update. On our corporate website, you can download the press release and the slides for this analyst and investor conference call. Given we issued a trading update only, today's presentation will be kept brief, after which we will open up the call for your questions. Maite Oosterveld, Joerg Gerbig, and Andrew Kenney are also here to provide answers. Regarding the question and answer session, as a reminder, we would like to request that each analyst only ask one question, and to manage your expectations, given this is a trading update, we won't be able to comment on financial metrics for 2024. On the following slides, I will provide more details, but the key messages for today's update are that we made further progress across our key strategic pillars, that constant currency GTV growth excluding North America was 2% in the first quarter of 2024, that we saw an improved exit rate for GTV growth following a slower July, that we reiterated our guidance for 2024, and lastly, that we have so far repurchased a combined €340 million under the free share buyback programs that we have launched in the past 18 months. If you would please follow me to slide three. We have made further progress across our key strategic pillars, which we believe will drive future growth. While the majority of our business is already growing, the group is also getting closer to that point. Let me be clear, our ambition is to not only be highly profitable, but also to grow. We therefore focus our efforts on free cash flow generation, growth, and portfolio. Our base is sound. We have strong market positions, a loyal and in many countries growing customer base, a growing estate of partners, and a healthy financial position. We've added almost 50,000 net partners this year so far, including circa 20,000 net grocery and retail partners. And we have, for instance, ramped up our investments in the UK and Ireland, but also in Germany. We also now enjoy 30% more visibility, correlated with the increase of matches in UEFA Champions League. While we have a clear strategy to enable growth, we do want to go faster. Cash is what fuels our ambition to grow, and we will therefore continue to free up further cash. We are continuously reviewing our cost base and our portfolio, and we are able to invest to make our business better. We will be on one European platform by the end of the year. This will increase our ability to service supply. It will allow us to launch Just Eat Plus, our subscription program, but it will also drive costs down. It will improve the overall user experience, accelerate innovation, and significantly improve speed to market of new product features. We've identified lots of opportunities to be more efficient as a business. We will continue to automate and simplify our processes, for instance, to provide seamless and efficient customer care. Many of the changes now and in the future will be AI driven. Our logistics capabilities are constantly improving with speed of delivery going up and cost per order going down. We will further improve the efficiency of our logistics, for example, with the simplification of the delivery models in the UK, but also with product improvements. Delivering Europe, for instance, today is much faster than what it was last year. We will also reduce the amount we spend on third-party suppliers and facilities, and we will set up ourselves to be more efficient and to focus on the right things for our business. These costs and operational efficiencies have already allowed us to increase investments while maintaining our financial outlook, and we foresee many more benefits in the Maite will speak in more detail about a strategy to further optimize our cost base to reinvest in the business at the full year 2024 results publication in February. Moving to the next slide. Well, you can see that we continue to have strong momentum in our Northern European and Yukon Island segments. As a reminder, these two segments in aggregate represent circa 60% of group orders and have now been growing consistently for over a year. which is obviously very encouraging, despite the macroeconomical situation of the countries in which we operate. In Northern Europe, we delivered a year-on-year constant currency GDP growth of 3% in the third quarter of 2024, of 4% on a reported basis. We have continued to invest in expanding our logistics network across Northern Europe, enabling us to serve more consumers with a wider choice of partners, including a wide variety of supermarkets, cosmetics, and electronics. We are excited to have partnered with REWE and now are the only food delivery business in Germany with a nationwide 30-minute grocery delivery service. Enhanced supply and choice will remain to be a key driver for increased order frequency and consumer loyalty. In the UK and Ireland segment, reported GTV growth was 6% to 4% in constant currency in the first quarter. This growth was in part supported by the continued momentum of our grocery and other adjacencies business across the UK, with recently having announced partnerships with Waitrose, HelloFresh, Boots, and Cart Factory, to name a few. Operationally, we continue to benefit from ongoing improvement in our logistics business, helping to support margin expansion while maintaining healthy levels of investment in price and marketing. On the right side of the page, CNs are smaller segments You can see that while the year-on-year growth continued to be negative, GTV has stabilized when looking at the quarter-by-quarter development. Moving to slide five. On the left side of the page, the graph indicates GTV growth for the group, excluding North America. On a constant currency base, our GTV grew by 2% in the first quarter. On a reported basis, growth was 3% year-on-year. In the first nine months of 2024, the constant currency DTV growth excluding North America was 3% year-on-year within the guided range of 2% to 6% DTV growth for the full year. On a reported basis, year-on-year growth was 4%. As mentioned in the key messages, the quarter started with a slower July across all segments. However, both August and September were stronger with year-on-year growth rates above the level we reported in the first half of the year. In the North America segment, the year-on-year growth continued to be negative. There were, however, many improvements made to this business, and Grubhub, meanwhile, continues to make progress towards free cash flow breakeven. To conclude this slide, GDP for the group, including North America, was down 3% in the third quarter of 2024 versus the same period last year, both on a reported as well as on a constant currency basis. On the next slide, We summarized the combined results of the free share buyback programs we launched in the past 18 months. Under these three programs combined, we have so far repurchased 340 million worth of shares, representing approximately 25 million shares at an average price of €13.67. The third 150 million buyback program launched in July and is now 26% completed, which implies that there is another 110 million to be repurchased until completion. In addition, following the completion of a legally mandated objection period of two months, last week we cancelled 5% of the issued shares to reduce the number of issued shares outstanding. Moving to the last slide of the presentation where we reiterate our guidance for 2024. We expect constant currency GTV growth excluding North America to be in the range of 2% to 6% year-on-year. In the first nine months of 2024, the constant currency GDP growth excluding North America was 3% year-on-year or 4% on a reported basis. We remain focused on profitability and expect to deliver an adjusted EBITDA of approximately €450 million. In line with the top-line growth trajectory and normal seasonality of our business, we expect adjusted EBITDA generation to be back-end loaded towards the second half of this year. We expect free cash flow before changes in working capital to continue to be positive in 2024 and thereafter. And to conclude this slide, we reconfirm our long-term target of group-adjusted EBITDA margin in excess of 5% of GTV. This concludes the brief presentation. So, operator, can you please open the call for questions?

Sure. Thank you. As a reminder, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. We will take the first question from line Monique Pollard from City. The line is open now. Please go ahead.

Hi. Good morning, everyone. Just one from me. I know at the first half you talked about the UK cost per delivery order being down 12%. I'm just wondering if you can give us any update on that for the third quarter, particularly as we'll have had a full period impact of UK minimum and living wage increases.

Thank you. I think York is the best place to answer that question.

Hi. So, yeah, we're making good advancements on our logistical model, in particular in the U.K. As you were saying, a few things contributed here. First, simplification of the model, and second one, technology improvements. Let me explain a bit first. So, last year, we already started with a simplification of the courier model in the U.K. We had a third-party provider, but we now actually scaled that all in-house and fully transitioned that away from the third party into our own logistical independent courier model in the UK. So that was driving quite a bit. Secondly, we also had other big levers which improved. We had pooling, which we unlocked already in the past, and we still are developing that further and creating more efficiencies on that. And then we're also seeing further improvements on courier performance through order flows and algorithmic optimizations. So we are pretty keen to further extract further improvements. Obviously, we also see cost of living having an impact, but overall, we're very confident on improving the courier efficiency, but at the same time, also having a seamless experience for stakeholders going forward. So there's definitely way more to come. And the good thing is that these are actually then the cost savings we're able to invest into the business as we've in the first half of this year, actually this allowed us to significantly invest more into the UK business and at the same time increase profitability.

Okay, thank you.

Here we will take the next question from line Christopher Junan from HFBC. The line is open now, please go ahead.

Yes, good morning all. Thanks for the opportunity to ask a question. I would just like to pick your brain again this quarter on where we stand with the US fee caps. Just generally, what's your view here? It seems we have the sufficient votes, but if it doesn't come up to a vote, then is this just going to expire again like last year? What's your best guess on what's going to happen with respect to fee caps? Thank you.

That's a good question. We have good momentum on that subject, but the truth is to be told that also last year we had good momentum on that subject. So we've learned not to be overly optimistic about the progress, but there is progress, and we remain convinced that the FIGAs will roll off, and obviously the sooner the better.

Thank you.

We will take the next question from line Sylvia Cuneo from Deutsche Bank. The line is open now. Please go ahead.

Thanks. Good morning, everyone. My question is on the implied GTV per order. It looks like it improved for most of the segments this quarter, with the only exception of North America. And I wanted to ask if you could elaborate on the key factors driving the growth in GTV food inflation still being a major driver, or is the growth driven by perhaps strategic initiatives to benefit the basket size? Thank you.

Yeah, thank you. Well, there's a couple of things in there. So sometimes we offer more services and we charge for that, so that's part of it. There's also food inflation still. I think People focus a lot, for instance, on our delivery fees that we consistently try to keep low because we're generally a good value brand, right? We try to keep our prices low towards our consumers. Food prices, however, are going up globally, but especially in many European countries in which, you know, you just have to pay more money for your food. And that's what you see in that growing ATV.

Thank you.

We will take the next question from line Joseph Bernard from UBS. The line is open now. Please go ahead.

Excellent. Thank you for taking my question. So when we look at the wider food delivery space, we've seen significant outperformance from one peer specifically, in part driven by sort of portfolio action and self-help. Can you update us on your current views on the wider portfolio and perhaps specifically views on investment levels and path to shareholder value creation within SEANS? Thank you.

Thank you. I followed you until the say answer part of your question. I think it's important to understand that we are focused on these three things, right? So, free cash flow generation, growth, and portfolio. So, obviously, we are a business that should be a growth business. Now, I think from a profitability perspective, we're actually in a very good shape. We're very excited about the progress that we've made. We're very excited about the additional opportunity that we have. We are able to invest more money than we initially planned. So, also, I think in terms of cash flow generation, we're actually in a very good shape. However, we need the business to grow. Now, there's two ways of accomplishing that. There's portfolio action and or there is investment in growth and making sure that we do everything that we possibly can to make this business grow faster. If you ask about sales in particular, it's a bit of a mixed bag. We're actually doing quite well in Italy, for instance. The Spain situation is very binary. As you know, we are dealing with competition that is not exactly following the law, and we are, which is more costly, so it's binary. It's a mixed bag, but we are overall trying to improve our cost base, and we are trying to improve our efficiency. And in some cases, you know, the changes that we make actually have a benefit globally. You know, we make considerable amounts of changes to our logistics network, and obviously that's a global network. It gets us a lot more firepower in certain markets in which you, for instance, do quite a lot of logistics. The UK is a very obvious example of that. But we also look at offices not doing certain things. You know, obviously in a large business, you have quite a lot of activities, not all activities are as valuable as the other. So we have very extensive cost programs. We have very extensive tech programs that we know that will drive efficiency up and cost down. But yeah, as I said, we also look at portfolio, but it always takes two to tango in that discussion.

If I'm able to have a quick follow-up, you mentioned being happy with profitability progress. Is it fair to say that if you over deliver on efficiencies, you're more inclined to reinvest that into growth rather than further over deliver on profitability? Or are you sort of balancing the two?

Look, I mean, we've always been, so if you go back a couple of years, we've always been a business that was quite good at cash generation. So think of, you know, Holland or Germany or the UK. So we know very well how to do that. I think we're all excited about the opportunity of um well i've described this before it's sometimes it looks a bit like a gold miners okay well you know we can get some money there if we for instance give you a small uh example introduce a pin code in the uk for deliveries that sounds maybe a bit strange and abstract but you know if you're if you deliver the food yourself in a logistics network We are actually the party that needs to compensate customers if the food doesn't arrive. So if more food arrives, we pay less compensation costs and we have additional firepower. That's the way you need to think of this business. We've identified a lot of opportunities. You've seen our profitability move up considerably in the last, well, I'll call it one half, two years already.

but there's many things still to come.

Part of that will be reinvested, but certainly also we care about the profitability margins. So we'll do both.

Excellent. Thank you very much.

Thank you very much. Thank you. As a reminder, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. We will take the next question from line Joey Gooden, Co-Prompt, Capital Shiverik. The line is open now. Please go ahead.

Thank you very much. Quick one on North America. The order declined by 10.7%. I was wondering if you could maybe give us some more color on what drove this decline, maybe also breaking it down into Grubhub and Skip the Dishes, if possible. Thank you.

Yeah, thank you. Well, obviously, we can't comment on individual countries in the segment, but just overall, our focus in the segment is to not lose cash. And therefore, the way we run that business is different from the way we run Europe. In Europe, we are, in any of the countries in which we operate, a very large player. We have a lot of firepower, a lot of brand awareness. You know, we can strike deals with large supermarkets, et cetera, that we have to invest in, but that will drive growth, et cetera, et cetera. So the situation is very different in North America. We want the business to be cash flow positive. And if that's, of course, the case, you're going to make sure that you run a business for profit. You don't want to run the business for growth. The reason for that, obviously, is because of the fee caps. The fee caps don't allow us to make more investments than we do currently, and therefore we should be focused around the business not being a drag on the rest of the company.

Understood. Thank you.

We will take the next question from line. The line is open now. Please go ahead.

Good morning. My question is on the UK and Ireland. We've seen some consumer confidence deteriorations in September in the region. Did this have a meaningful impact on your order numbers in September and going forward, or you haven't really seen any change there? Thank you.

No. Actually, if you look at our the three things that matter to us. It's the user base, it is the order frequency, and it's the return rate. So we just need to add new customers to grow, or we need to have the order frequency go up. That's usually a derivative of adding supply. So if you have more choice, if you have more services, then we'll have more orders from our consumers. And then there's the return rate of those consumers in a particular month. So if you think about, let's say in the UK you have 25 million customers, a percentage of those customers comes back every single month. And that percentage obviously needs to increase. We think that that percentage for us is difficult to influence because that's connected to the economy. But then if you look at the quarter, we gave you a bit of information. We actually did much better in September than what we did in July. So we don't really see that actually. And I would also be surprised to see it on that level. I think generally food prices going up has an influence, but, you know, food prices going up a couple of more cents next month doesn't make a difference.

Thank you.

Thank you. We will take the next question from line Wim Gale from ABN Omer. The line is open now. Please go ahead.

Yes, a very good morning. The first question is on M&A. A lot of M&A has been ongoing. Can you be very specific if you have any discussions ongoing on portfolio rationalization regarding menu log, group up, and or skip the dishes? The second question in relation to this one is that if we look at market shares, I think throughout Europe they've been pretty stable in the last four quarters. which is not necessarily the case for Australia, New Zealand, Canada in particular, and the USA. So it's a bit of a binary thing where you are doing well in Europe and not in the rest of the world. So isn't it time to accelerate those M&A discussions taking into account your strengths and weaknesses? Thanks.

Thank you. I can't comment on individual countries, but we do have a lot of M&A discussions with a lot of different parties globally.

But as I always say, they have to materialize in order for us to comment on them publicly. So I realize that if you're looking at it from the outside and you say, oh, shouldn't you be doing something? That implies that we're not doing something, and that's not correct. Thank you.

Thank you. As a reminder, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. We will take the next question from line Shane Kelly from Benoit Delibere. The line is open now. Please go ahead.

Thank you, and good morning, everyone. Can I ask about the Amazon deal in the U.S.? Is there any update or is there anything you can share in terms of what you're seeing? With respect to that, are you seeing new customer acquisition being driven by the inclusion of Grubhub in the Amazon app? Or is it too early to tell still? And then linked to that, if we unpick the North American order number changes in Q3, could you comment a little bit on the impact that Grubhub Campus has had on those numbers in this quarter? Obviously, if Grubhub Campus is

quite strongly then that implies a slightly weaker performance of the rest of the business and vice versa thank you yeah I think Andrew is best precision yeah I mean on the first point I mean we've been very pleased overall with the the Amazon partnership that those customers perform well on the platform so they're generally a strong cohort overall and within the general growth hub plus base and Obviously, the partnership reached a different sort of elevation with the embedded store within Amazon's platform, and that's also performed well. But I think, you know, you need to look at this in the context of a business that, you know, where we've said the priority is to get the business to positive free cash flow, and therefore – The Amazon partnership has also been a very supportive vehicle in allowing us to get national and nationwide-type exposure in an environment where our marketing spend is perhaps not at the level that would be optimal for a market of that scale and size. So, yeah, it has done a significant amount of heavy lifting for us. On the group of campus, yeah, that is a real bright spot, I think, within the business generally. We've added a lot more campuses for the 24, 25 academic year. So you'll start to see that roll in. But, of course, it is a very seasonal business. So the latest quarter would be actually the quietest quarter of the year as students and campus residents, et cetera, are on vacations.

Thank you very much both of you. If I can follow up very quickly on the first question. Would it be a fair characterization to say that as the Amazon partnership brings new customers in, you see that as an opportunity to further reduce marketing spend on an ongoing basis? I'm trying to get to a sense of what the strategy is here. Is it to use the Amazon partnership to continue growing or is it to use the Amazon partnership to take more cost out of the middle and bridge that to profitability?

Yeah, I mean, I think you've seen that dynamic play out already where we've pulled back on some marketing spend for the reasons that I've already articulated, the necessity to right-size the cost structure for growth. Now, that's not to say that we are not leaning in and looking for all opportunities to grow and optimize our spend, but it is at a more subdued level sort of monthly run rate of marketing spend than we've had in previous years with the Grubhub business. And that is all taken into account with the rationale and levels of investment and energy that we put into this Amazon partnership. But I wouldn't articulate it as a situation where you'd expect us to be taking the foot off further from our overall spend levels. It is a big supportive tool.

Perfect. Thank you very much.

We will take the next question from line Andrew Rose from Backlist. The line is open now. Please go ahead.

Great. Good morning, everyone. I've got a question, I guess, in two parts. So the first part is to dive into more detail as to why Northern Europe slowed in Q3 compared to Q2. Clearly, you've touched on weather and you've touched on macro, but are there any other issues? And I guess taking a step back, The hope would have been that the market gradually would improve in the UK and Northern Europe as we go through the next few quarters. That doesn't seem to have happened in Q3 versus Q2. Is that something we should be concerned about from a structural perspective, or is your view still that the market can gradually accelerate from here? Thanks.

No, you shouldn't. It was very clearly July, and the current rates are off in the first half year. So, actually, the exit rates are improving. We do, and I think that's important to understand, we're doing a lot of heavy lifting in Europe, in the UK, in terms of supply, product development, speed of delivery, reduction of cost, increase of investment in many places. So, We're actually doing a lot of work on it, so we would expect that growth trajectory to continue and to also improve going forward. July, if you ask us, combination of weather, calendar structure, that sort of thing. But we don't really like to comment on the weather, but if you ask us about uh whether there's there's a structural issue in these markets no there isn't cool that's helpful thank you thank you very much there appears no further question i will hand it back over to your host for closing remarks i would like to round off this analyst and investor call by thanking you for participating and for your questions Before we close this call, I would like to let you know that we've decided to combine our fourth quarter trading update with our full year 2024 results publications, which are both scheduled for the 26th of February. And in the meantime, should you have any additional questions or remarks, please reach out to our investor relations team. Have a nice day.

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